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| Retirement Hack: Delay Taxes and Boost Your Nest Egg by Working Past 73 |
Imagine pushing back that dreaded RMD (Required Minimum Distribution) and letting your retirement savings grow tax-free for a while longer. Sounds too good to be true? Hold on, savvy savers, because with a little strategic planning and some part-time hustle, it might just be possible.
The Problem: Reaching age 73 (soon to be 75 in 2033) typically triggers mandatory withdrawals from your retirement accounts like 401(k)s and IRAs. These RMDs can bump you into a higher tax bracket, potentially draining your hard-earned nest egg faster than you'd like.
The Solution: Keep working past 73 and stay enrolled in your employer's 401(k) plan. Thanks to recent law changes, even part-time work (500 hours/year for 3 consecutive years) qualifies you to postpone RMDs from that specific plan.
The Benefits:
- Grow your nest egg: More time in the plan means more contributions and compounding interest, boosting your retirement income down the line.
- Minimize tax hits: Delaying RMDs keeps your taxable income lower, potentially avoiding higher tax brackets.
- Plan your withdrawals: Buy time to convert other savings to Roth IRAs (tax-free withdrawals in retirement) for a more tax-efficient future.
But Wait, There's a
Catch:
- This perk only applies to your current employer's 401(k), not past plans or IRAs.
- Forget delaying if you own 5% or more of the company.
- Once you formally retire, RMDs start, even if you do part-time work for the same employer.
Action Steps:
- Talk to HR: Explore flexible work arrangements to hit the 500-hour mark.
- Consider a Roth IRA: Convert traditional accounts to Roth IRAs during your working years to pay taxes now and enjoy tax-free withdrawals later.
- Maximize health savings accounts: Use employer-sponsored HSAs for tax-free medical expenses in retirement.
Remember, consulting a financial advisor is crucial to ensure this strategy aligns with your specific goals and circumstances. So, dust off your resume, unleash your inner hustler, and watch your retirement savings flourish tax-free for a little while longer!
